India and the European Union are moving closer to finalizing a major free trade agreement. Recent reports indicate that twenty out of twenty-four chapters in the pact have been completed. This development comes as EU leaders prepare to visit India later this month.
Timing and Significance of the Agreement
The timing for this deal appears particularly opportune. India has recently secured trade agreements with countries like Australia, the UAE, and the UK. These deals have significantly improved market access for Indian businesses. Now, with trade negotiations with the United States progressing slowly, an agreement with the European Union offers access to one of the world's largest economic regions.
This free trade agreement would represent the largest such pact India has ever entered. It aims to strengthen an already robust bilateral trade relationship. The EU stands as one of India's most important trading partners. In 2024, merchandise trade between the two reached approximately €120 billion. Services trade recorded €59.7 billion in 2023. The EU also serves as a major source of investment flowing into India.
Key Challenges and Sensitive Areas
Despite the progress, several sensitive issues remain unresolved. Automobiles and alcohol represent particularly delicate sectors that require careful handling. Another contentious point involves the EU's carbon border adjustment mechanism, known as CBAM. This carbon tax, which took effect on January 1, affects carbon-intensive exports from India including steel and aluminium products.
The final agreement must address India's concerns regarding these measures. Additionally, India seeks to expand pathways for skilled professionals to work within the Eurozone. Both sides need to respect each other's sensitivities throughout the negotiation process.
Current Status and Future Prospects
Reports suggest that India's non-negotiable positions have been accepted by EU negotiators. Contentious agricultural issues have been set aside for now. The intent is to reach a final agreement before EU leaders visit India. European Council President António Luís Santos da Costa and European Commission President Ursula von der Leyen will attend the 77th Republic Day celebrations as chief guests.
Successfully concluding this deal could provide a significant boost to Indian exports. Merchandise exports from April to December 2025 reached $330.29 billion, showing a 2.4 percent increase from the same period last year. While pursuing the EU agreement, India must continue advancing trade talks with the United States to maximize global market access.
